Jobs a factor in United Technologies tax credits

Published March 07. 2014 12:01AM

By STEPHEN SINGER AP Business Writer

Hartford - When Connecticut struck a deal for up to $400 million in tax credits for its largest private employer, United Technologies Corp., both the state and the firm said it ensured the headquarters for the company's helicopter and aerospace divisions would remain here "for years to come."

There had been no imminent threat that the Hartford conglomerate would pick up and move its subsidiaries. But officials say there were worries about a gradual shedding of jobs as aerospace customers worldwide expect their suppliers to be closer and cheaper labor becomes more available in central Europe and Asia.

"We were very concerned that, over time, incremental decisions could lead to a slow erosion of jobs," said Catherine Smith, Connecticut's economic development commissioner.

In addition, executives were clear they "would look around" as United Technologies considered building an engineering home for jet engine maker Pratt & Whitney and upgrading its research and development site, Smith said.

The deal announced last week calls for UTC to spend up to $500 million to upgrade and expand facilities at Pratt & Whitney in East Hartford, Sikorsky in Stratford and UTC Aerospace in Windsor Locks. The agreement, which requires approval by the legislature, calls for the state to offset up to $400 million in sales and income taxes over 14 years. To take full advantage of the tax benefits, the company must hire more engineers and other workers and boost its payroll.

United Technologies promised to maintain its Pratt & Whitney headquarters for 15 years and its Sikorsky headquarters for at least five years.

Prized, good-paying manufacturing jobs have been leaving Connecticut for years, but the threat that Pratt & Whitney and Sikorsky could leave behind their massive headquarters and manufacturing plants has been less acute.

Harvey Jackson, president of the Teamsters Local 1150 that represents Sikorsky workers, said talk of the helicopter maker quitting Connecticut is just that: talk.

"It always becomes the subject of some concern," he said. "But if you're around long enough you hear those rumors from time to time."

Christian Mayes, an analyst at Edward Jones, said moving operations is disruptive, with companies finding it easier and more efficient "to keep production where it is."

Pratt & Whitney and Sikorsky date their presence in Connecticut to the early years of aviation. Pratt & Whitney was founded in Hartford in 1925, two years before Charles Lindbergh flew solo across the Atlantic. And aviator Igor Sikorsky purchased land in Stratford in 1929, where the helicopter maker remains.

Still, with cheaper labor available elsewhere, Pratt & Whitney employment in Connecticut has fallen from more than 20,000 in the 1960s to about 9,000 now. Smith said the state was worried that jobs would continue to exit Connecticut, particularly after United Technologies paid $18.4 billion to buy aerospace parts maker Goodrich Corp. in Charlotte, N.C. United Technologies moved 80 salaried jobs, including many top executives, from the former Hamilton Sundstrand site in Windsor Locks.

To get the most from the deal, Pratt, UTC Aerospace and United Technologies Research Center must increase the number of engineers in Connecticut to 5,000 from its current 4,900, increase total employees to 14,400 from 14,100, maintain an in-state payroll of $1.57 billion and spend $810 million on research and development and capital projects. Separate investment levels at Sikorsky are required to guarantee additional funding.

Mayes noted Washington state offered Boeing Co. nearly $9 billion in tax breaks to keep production of its 777 airliner. "The United Technologies tax credits of up to $400 million are tame in comparison, though still helpful," he said.

The use of earned research and development tax credits is vindication for Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut, who called on the state in 2010 to reclaim unused research and development tax credits as an incentive to companies to build and equip manufacturing, pharmaceutical, bioscience and research operations.

He cited the decision by Pfizer Inc. in 2011 to lay off more than 1,000 employees at its research and development site in Groton as some operations were shipped to Cambridge, Mass.

A similar decision by United Technologies would be devastating, he said.

"You could measure the loss of state revenue with those people," Carstensen said.